Tutorial: Government Bonds

What are government bonds?

Government bonds are medium- to long-term debentures issued by the public sector. The Federation, the provinces, and the municipalities use government bonds to finance long-term state infrastructure projects such as road and rail construction, education, and the healthcare system.

How do government bonds work?

Government bonds are primarily issued in the form of fixed-rate securities. Their coupon is usually paid once a year. At the end of maturity, the bond is redeemed at nominal value. This means that income and payment dates are scheduled.

Your benefits

Government bonds are an attractive long-term investment opportunity with limited risk. They are suitable for conservative investors who look for safe forms of investments.

Your advantages

You benefit from attractive interest payments throughout the entire term of the bond. The amounts and the payment dates are fixed in advance.

Details you should be aware of

Between issue date and maturity, price fluctuations are possible, which means that the sale of the bond prior to maturity may result in a loss.
The 100% capital redemption only applies to the end of maturity.

How do government bonds react to…

… rising interest rates?
Government bonds with fixed interest rates fall when interest rates are generally rising. If you sell your bonds prior to maturity, you may record a loss.

… stable interest rates?
In the case of stable interest rates, the price of government bonds does not change.

… falling interest rates?
Government bonds with fixed interest rates increase when interest rates are generally falling. If you sell your bonds prior to maturity, you may record a profit.

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